Many individuals view life insurance plans only as a form of financial protection for their family. While that is true, a life insurance plan can offer more than just protection. Intriguing, isn’t it? Continue reading to find out how to invest money through a savings plan.
What is an insurance cum savings plan?
A savings plan is basically a type of a life insurance that combines the elements of insurance and savings. The insurance component of the plan offers you a life cover that allows you to protect your family from the uncertainty of life. On the other hand, the savings component of the plan invests your premium contributions in various instruments to provide you with the ability to create wealth.
A major advantage of a savings plan is that it is one of the many tax saving investments out there. The premiums that you pay towards a savings plan can be claimed as deductions to the tune of Rs. 1.5 lakhs in a financial year as per section 80C of the Income Tax Act, 1961.
This helps you bring your overall tax liability down. That’s not all. Both the death benefit and the maturity benefit of a savings plan are also exempt from tax under section 10(10D) of the Income Tax Act 1961. The above deductions and exemptions are subject to the provisions contained in the Income Tax Act, 1961.
There are primarily two different types of savings plans out there - participating savings plans and non-participating savings plans. A participating savings plan offers you bonuses, as may be declared by the insurer, over and above your basic sum assured, which can enhance your overall payout. A non-participating savings plan offers guaranteed returns with no bonuses applicable.